• We believe MyEG would remain as one of the key facilitators of e-government services given its strong brand presence and solid track record in that space.

• We cut FY17E/FY18E/FY19E earnings forecast by 12%/16%/22% respectively as we expect lower revenues from certain segments on possible competition from new entrants.

• Maintain BUY at lower TP of RM2.60 (from 3.75) (WACC: 8.6%, terminal growth rate: 1%). We believe this is fair given to MyEG strong presence in delivery e-government services

Limit down overdone

MyEG’s share price have taken a significant beating in the past 2 days post-election amidst concern over its huge exposure to government businesses as well as the presence of board members which are closely tied to the previous administration. However, we take the view that MyEG’s strong track record and branding in the e-government services would see MyEG retaining its dominant presence in the space.

Prudent policy undertone

With the new government setting a more prudent policy undertone, we believe retaining MyEG’s services ensure processes remain efficient. However, we believe there is a possibility that fees charged are lowered and more measures introduced to ensure healthy competition in the e-government services space. We pare down our FY18F/FY19F/FY20F earnings by 12%/16%/22% to mainly reflect the lower fee structure.

Opportunities in new Malaysia

We believe MyEG’s outlook remains positive. We expect another round of Foreign Worker Re-hiring Program (FWRP) to achieve the target limit of 4 million foreign worker in its first year. This would also give potential upside to MyEG’s foreign worker renewal services in FY20F. We believe GST monitoring devices could be converted to monitor SST collection albeit, in our view, there is high likelihood of the service to be carried out at a reduced rate and possibly being opened for tender for the entry of a new player.

Maintain BUY at lower TP of RM2.60

Reiterate BUY with a lower DCF-derived TP of RM2.60 (WACC: 8.6%, terminal growth rate: 1%) (from: RM3.75) which implies FY18F PE of 34x before easing to 26x for FY19F. We believe MyEG’s strong track record in e-government services could stave off competition.

Source: BIMB Securities Research - 17 May 2018